The payday loan industry in Louisiana

Jeremy Alford on potential regulation of payday lenders — which may be the sleeper issue of this year's legislative session

The gentleman — suited up for political engagement and breathing a little heavy — handed over a press release when I answered in the affirmative. The headline did the rest of the talking: "Payday lenders currently charge interest rates 10 times higher than felony loan-sharking laws allow."

Later that morning outside the Louisiana House's basement committee rooms, a longtime lobbyist on the other side of the issue laughed as activists took to the steps of the Capitol in support of Together Louisiana, the group responsible for the press release. "Everybody's getting a piece of this one," he said, referring to the teams of lobbyists being assembled.

Few would have believed it a few months ago, but the push to implement more consumer-friendly rules on payday loans has become one of the most heavily lobbied issues of the legislative session. Sure, a slew of litigation issues, ranging from tort reform to coastal-related lawsuits, will take over that claim soon enough. For now, however, the payday loan industry and its critics are putting on the biggest show to be seen in the Capitol.

It's not just lobbyists. Stepping up are associations such as Together Louisiana, a mix of Democrats, community advocates and faith-based organizations married by Together Baton Rouge and the New Orleans-based Jeremiah Group. Together Louisiana was formed a year ago to take on socioeconomic issues.

The decision to paint payday lenders, which offer loans with high interest rates, as legal loan sharks is an early sign that Together Louisiana has a bite of its own. The fledgling group is lobbying in partnership with Habitat for Humanity, AARP, the Conference of Catholic Bishops, the Louisiana Budget Project and the Southern Baptist Convention.

For their part, the payday lenders aren't exactly flailing in the legislative waters. They are lobbied up as well, and we'll know soon who has the stronger team. Lender lobbyists already are explaining that their clients provide a legitimate service that helps borrowers who otherwise might have to go to unregulated loan sharks.

Together Louisiana and its allies counter that payday lenders actually operate a lot like loan sharks. They contend the lenders set up walk-in offices in low-income neighborhoods and seek clients among the working poor. Talking off the record, they even suggest the payday lenders are setting up in the same neighborhoods where real loan sharks sit in the back of pool halls and bars and other stereotypical settings.

The Legislature last took up this issue in earnest in 1999, when lawmakers attempted to cap rates and curb fees, with mixed results. How much in interest are we talking about? Opponents often use the example of a $100 loan with a typical interest payment of $30, although figures vary.

This go-round, two proposals take aim at the payday lending industry — SB 84 by Sen. Ben Nevers, D-Bogalusa, and HB 239 by Rep. Ted James, D-Baton Rouge. Among other things, the measures would cap short-term loans at 36 percent annually as well as lump in all fees as part of the proposed new definition of "interest."

Nevers and James also are focusing on the practice that gives the industry its name. They want to further prohibit the act of having borrowers write a postdated check for the amount of the loan plus interest, which can then be rolled over to new loans if the customer cannot cover the face amount of the check.

Whatever the outcome, this fight will be one to watch. It's already shaping up as the sleeper issue of the session, a debate that some say pits right against wrong. With both sides bringing in experts and lobbyists, it'll certainly be expensive.

In fact, the buzz around the Capitol these days is all about the money behind the money being loaned. At least 40 lobbyists representing payday loan companies met for a strategy meeting in the Capitol in mid-March, according to one who attended. While tactics and policy were definitely on the agenda, there also were hushed whispers about the real payday in question — the one coming to the worker bees.

As another lobbyist in attendance joked, "The payday loan industry will have to take out a payday loan to pay its lobbyists."